By Michael D. Yates
Karl Marx’s famous dictum sums up my teaching philosophy: “The philosophers of the world have only interpreted the world in various ways; the point is to change it.” As I came to see it, Marx had uncovered the inner workings of our society, showing both how it functioned and why it had to be transcended if human beings were to gain control over their lives and labor. Disseminating these ideas could help speed the process of human liberation. From a college classroom, I thought that I could not only interpret the world, I could indeed change it.

Thinking is one thing; the trick is bringing thoughts to life. How, actually, does a person be a radical teacher? How, for example, can students be shown the superior insights of Marxian economics in classes that have always been taught from the traditional or neoclassical perspective—taught, in fact, as if the neoclassical theory developed by Adam Smith and his progeny is the gospel truth? My college expected me to teach …

From The Abstract:
The relationships between financial systems and the macro-economy with emphasis on the saving-investment relationships and the nature of money are set out. A circuitist framework is extended to reflect some major features of the era of financialisation circa 1980.
Read the rest here.

* FESSUD is a multidisciplinary, pluralistic project which aims to forge alliances across the social sciences, so as to understand how finance can better serve economic, social and environmental needs. For more on the project, see here.

By John Quinterno and Dean Baker
Last year North Carolina undertook a radical overhaul of its
unemployment insurance system. Among the changes, legislators sharply
reduced the amount and length of regular unemployment insurance, cutting
the maximum weekly insurance amount by 35 percent and reducing the
maximum duration of compensation from 26 weeks to, currently, 17 weeks.
By implementing the cuts in weekly benefit amounts in July, North
Carolina forfeited its ability to participate in the federally-funded
Emergency Unemployment Compensation program, and consequently, an
estimated 70,000 individuals immediately lost long-term unemployment
insurance, while another 100,000 individuals who still would have been
eligible through the fall saw their insurance lapse sooner than would
have happened.
According to the legislation’s elected supporters, the overhaul was a
“difficult decision” needed to fix “a welfare-dependent program” and
push unemployed workers to get serious ab…

Larry Summers (here) and Paul Krugman (here) have recently identified the phenomenon of stagnation. Given that they are giants in today’s economic policy conversation, their views have naturally received enormous attention. That attention is very welcome because the issue is so important. However, there is also a danger that their dominance risks crowding out other explanations of stagnation, thereby short-circuiting debate.

Krugman has long emphasized the liquidity trap – zero lower bound to interest rates which supposedly prevents spending from reaching a level sufficient for full employment. Summers has added to this story by saying we have been in the throes of stagnation for a long while, but that has been obscured by years of serial asset price bubbles.

That is a good start to the conversation, but there are other views that dig deeper regarding the causes of stagnation.

It is possible to identify in The General Theory and Kalecki's
work key ideas that they had in common. The first is that in a
capitalist economy output and employment are determined by business
investment, so unless investment is high enough the economy is unlikely
to be at full employment. Secondly that investment determines saving,
rather than the other way around. Both men denounced the doctrine of
the social value of thrift that so comforted the complacent Victorian
bourgeoisie and that just made such a comeback today. Finally, contrary
to the Neoclassical and the Ricardian-Marxist view both men argued that
wage rises would increase employment rather than decreasing it.
Underlying this commonality of view on how the capitalist economy works
was a fundamental principle of the economic method that Kalecki
explicitly employed to great effect and Keynes in a somewhat more
haphazard way: the principle of the circular flow of income. This is
the idea that income…

Nowhere is the national political divide more evident than on Capitol Hill. One topic, however, has had fairly consistent bipartisan support: free trade agreements. Since President Barack Obama took office, a few FTAs have been signed with approval by the Senate. That has been essentially true since the 1990s, when Bill Clinton and the New Democrats abandoned the traditional organized labor stance against free trade and signed the North American Free Trade Agreement, commonly known as NAFTA, with Canada and Mexico.

The current talk revolves around a proposed pact that has created some surprising partnerships. More about that in a minute. First, some background.

The Trans-Pacific Partnership, or TPP, the latest deal under discussion, is a free trade agreement between 12 countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States and Vietnam. These countries, for the most part, already have low tariffs and trade agreements among the…

Dr. Vernengo I presume?
I am pessimist by nature (or nurture), I guess. So I never thought that the current crisis would lead to a collapse of mainstream economics. As I often point out to my students, in the US, it was the Great Depression, and the rise of the Neoclassical Synthesis that made Marginalism dominant. Up to that point the profession was dominated by an eclectic group that included many institutionalists, like Commons or Seligman, a non-Marxist defender of an economic interpretation of history, both of whom were presidents of the American Economic Association (AEA). Mitchell, another institutionalist that was president of the AEA, was the head of the National Bureau of Economic Analysis (NBER). And the administration was full of institutionalist economists during the New Deal. So a crisis might actually lead to the consolidation of a paradigm that was actually contradicted by the facts (yes, full employment of factors of production is hard to defend if you have 25% une…

By Janelle Jones and John Schmitt
Since at least the early 1970s, and likely earlier, unionization rates for black workers have been higher than for other racial groups in the United States. As sociologists Jake Rosenfeld and Meredith Kleykamp (2012) have recently written, the labor movement has been “a remarkably inclusive institution vital for its economic support of African American men and women.” Nevertheless, the share of unionized black workers has been falling almost continuously since the early 1980s, reflecting a trend also seen in the workforce as a whole. In this report, we review the most recent data available to examine the impact of unionization on the wages and benefits paid to black workers. These data show that even after controlling for factors such as age and education level, unionization has a significant positive impact on black workers' wages and benefits.The union advantage is particularly strong for black workers with lower levels of formal education.
Rea…

Mark Weisbrot
Alexis Tsipras has a tough job. He is leader of the Syriza Party of Greece, a left party that has risen meteorically in the past three years: from 4.6 percent of the vote in 2009 to 27 percent last June. It is now the most popular party in the country and Tsipras could be the next Prime Minister. Unlike most of the eurozone's leaders, he knows what is wrong with Greece and the eurozone, and so does his party: austerity. "We have become the guinea pig for barbaric, violent neoliberal policies," he said at a forum at Columbia University Law School last week, in which I participated. Tsipras notes that Greece's fiscal problems could be resolved if the rich paid their taxes. The IMF's latest numbers [PDF] concur on this: according to the Fund, "annual uncollected net tax revenue [is] at 86 percent of collections in Greece, against an OECD average of 12 percent."
Read rest here.

For those around New York, tomorrow (Saturday, February 22, 2014) is the conference announced here before, on The State of Worldly Philosophy at the New School in 2014, organized by the Economics Student Union (ESU) at the New School for Social Research (11th floor on 6 E 16 St). Program is available here. Hope you can make it.

New Working Paper at the IDEAs Network. From the asbtract:
Prebisch believed that understanding the evolution of capitalist economies over time and in different contexts required a general cycle approach, which he labeled ‘dynamic economics’, encompassing all the different areas of economic activity. His dynamic economics stemmed from a critique of both neoclassical and Keynesian theories, which Prebisch viewed as static representations of capitalism. His dynamics was first applied to a closed economy and then to a center-periphery context. These combined the notion that profit is the driving motive of economic activity with a process of forced savings and the idea that the time lag between income circulation and the derived demand, and the time taken in the productive process was the main source of cyclical fluctuations. Prebisch’s dynamic theory, which he never completed, influenced his Development Manifesto (1949).
Full paper available here. From the conclusion:

Over the last three decades the wealth of the nation's very richest
1% has grown ten times that of the average worker, and over that time
period that same elite has captured more than half of the entire
income increases, leaving the bottom 99% to divide the remaining gains. This is all based on a new state-level study by the Economic Policy Institute (EPI), The Increasingly Unequal States of America: Income Inequality by State,
which looks at how inequality has seized hold of the national economy
both in the generation leading up to the great recession of 2008 and in
the several years following the so-called 'recovery'.
The levels of inequality we are seeing across the country provide more
proof that the economy is not working for the vast majority of Americans
and has not for decades; it is unconscionable that most of
America’s families have shared in so little of the country’s prosperity
over the last several decades.
Check out the state-by-state map on ineq…

I am not sure if this was posted before on Naked Keynesianism; nevertheless, here it is (from Monthly Review).
Thomas I. Palley sent John Bellamy Foster the following article in October 2009 for publication in Monthly Review,
accompanied by this note: “I’m hoping it might provoke some discussion
and also generate some dialogue and consensus between Marxists (like
yourself) and structural Keynesians (like myself).” Palley’s piece
addressed (along with much else) the article “Monopoly-Finance Capital
and the Paradox of Accumulation” by John Bellamy Foster and Robert W.
McChesney in the October 2009 issue of Monthly Review. In the
same spirit of promoting dialogue between Marxists and Keynesians on the
present crisis, we agreed to publish his contribution, together with a response by Foster and McChesney:
Aside from Keynes, no economist seems to have benefited so much from
the financial crisis of 2007-08 as the late Hyman Minsky. The collapse
of the sub-prime market in August…

By Gerald Friedman
There is a story that when the late union leader Walter
Reuther was given a tour of a GM plant, a manager introduced him to a
set of the company’s new robots. The manager challenged Reuther to say
how he would organize the robots into the UAW. The union leader
supposedly responded by asking: how will General Motors sell cars to the
robots? While American unions have failed to organize the workers in
the new economy’s factories, its capitalists seem to have figured out a
good answer to Reuther’s question. We shouldn’t be surprised that conservative politicians and
orthodox economists are calling for the Federal Reserve to end its
program of monetary ease and for the Federal government to end its
program of extended unemployment insurance. Believing in Say’s Law and
the virtues of unregulated markets, they have never been comfortable
with state action to help the unemployed; instead, they have long argued
that the only proper role for government is t…

In a recent post by NK, (see here), it was mentioned that when teaching macroeconomics, especially from a heterodox perspective, "one and has to deal, as always, with the
confusion generated by all manuals (to a great extent Keynes' fault for
using the term classical for everybody that came before him) between the
old classical political economy tradition and the marginalist (or
neoclassical, other misnomer, this one Veblen's fault) school." Perhaps the paper by Tony Lawson, "What is this 'school' called neoclassical economics" (see here, subsciption required), and "Sraffa and his arguments against marginism," by Maria Christina Marcuzzo and Annalisa Roselli (see here, subscription required), can be of assistance...

Tom Palley's new paper on MMT titled "Modern money theory (MMT): the emperor still has no clothes" is out. From the abstract:
Eric Tymoigne and Randall Wray’s (T&W, 2013) defense of MMT leaves the MMT emperor even more naked than before (excuse the Yogi Berra-ism). The criticism of MMT is not that it has produced nothing new. The criticism is that MMT is a mix of old and new, the old is correct and well understood, while the new is substantially wrong. Among many failings, T&W fail to provide an explanation of how MMT generates full employment with price stability; lack a credible theory of inflation; and fail to justify the claim that the natural rate of interest is zero. MMT currently has appeal because it is a policy polemic for depressed times. That makes for good politics but, unfortunately, MMT’s policy claims are based on unsubstantiated economics.
The full paper is here.

From Truthout Austerity: The History of a Dangerous Idea, a book written by
Brown University Professor of International Political Economy Mark Blyth
and published last year by Oxford University Press, is one of the most
important works to have emerged in recent years on the religion of
austerity, the new dogma in neoliberal economics that is so perniciously
enforced today in the peripheral countries of the Eurozone (Greece,
Italy, Ireland, Portugal, and Spain) and loved by Republicans and all
sorts of right-wingers in the United States. In his book, Blyth exposes
how dangerous the policy of austerity has been in the past and explains
why it resurfaced in the aftermath of the 2008 global financial crisis.
With his critical analysis of austerity, Professor Blythe also provides a
damning critique of orthodox economics and shows that class politics is
very much alive in the actions of today's governments and the rich.
Read rest here

In a previous post, Anonymous commented: "Brad DeLong has been posting slides from one of his classes going over
supply and demand (and quotas and price ceilings, market equilibrium,
etc.) on his blog. They're pretty entertaining and filled with
pop-cultural references. I was wondering what a Post-Keynesian
perspective on them might be."

I promised to check Brad's posts and provide a short answer. So here it is. In fact, this semester I am teaching an intro course, something I haven't done since my time in Kalamazoo College. This is not a regular course for me to teach, in other words, like say intermediate macro. At Bucknell all intro courses provide more than the neoclassical (marginalist) perspective. While Brad starts with a neoclassical version of supply and demand (see here) on the basis of Krugman's intro textbook, we start with history and history of ideas, based on a discussion of the classical authors and M…

Tom Palley models the role of the middle class in economic growth. From the abstract:
This paper presents a three class growth model with labor market conflict. The classes are workers, a middle management middle class, and a “top” management capitalist class. The model introduces personal income distribution that supplements conventional concerns with functional income distribution. Endogenously generated changes in personal income distribution can generate endogenous shifts from profit-led to wage-led regimes and vice-versa. A three class economy generates richer patterns of class conflict because the middle class has shared interests and conflicts with both capitalists and workers. Changes that benefit the middle class do not necessarily increase growth or employment or benefit workers.
The full paper is available here.

Not that is really necessary. But the evidence continues to be overwhelming. Christian Schoder in a recent paper (here; subscription required), following in the steps of the classic paper on the subject by Fazzari et al. (1988) and looking at the micro data on investment concludes that:
"Overall, demand constraints seem to be crucial factors contributing to the slowdown of accumulation in times of economic distress relative to credit market conditions. In contrast to the prediction of the financial accelerator literature that credit constraints tighten in the downturn (relative to demand constraints) as net worth deteriorates, the cash-flow coefficient does not exhibit a clear counter-cyclical pattern.

We further find that the most tremendous declines in business investment which occurred in the contexts of the recessions in 1982, 1990, 2001 and 2008/09 were driven by the demand side of the capital market rather than the supply side since, during these times, an improvement of i…

From The Real News NetworkNOOR: So one of the
chapters in your book is titled "Lies about Government", and you start
off the chapter by talking about fake economics, which is the term you
use to describe mainstream neoliberal economics. And you say it includes
as a central message the inherent inefficiency and intrinsic
malevolence of governments at all levels. Talk about what you mean and
how governments and their role in our economy is so vilified and why
that's done.WEEKS: It derives from a basic ideology that
says that everybody and everybody in the world is a consumer and that
you derive your pleasure in life from consuming, which, if you reflect
on it, obviously is a pretty sick idea. I mean, people who actually
behave that way I think are rather unhappy people. But at any rate, if
you take that position, if you take that analytical position, then it
follows that taxes are a burden--they take away an individual's ability
to consume. And they are-…

Another entry in my peek at peaks series. These are (highly) contingent forecasts for the future of the macroeconomy and the planet. While there is plenty of statistical uncertainty to go around in such forecasts, the main contingency is which UN population forecast you believe in.

Most of my figures are based on the "low" forecast for two reasons. One, that is the one we are closest to. Two, that is the one we should be on, or one even lower.

Teaching macroeconomics, and having to deal, as always with the confusion generated by all manuals (to a great extent Keynes' fault for using the term classical for everybody that came before him) between the old classical political economy tradition and the marginalist (or neoclassical, other misnomer, this one Veblen's fault) school.

Not all classical authors accepted Say's Law, to which Keynes' Principle of Effective Demand (PED) was contrasted, but all neoclassical authors do accept it (last week the Societies for the History of Economics, aka SHOE, had a very confusing discussion on Say's Law, in which this simple fact got completely lost by a few debaters). Marx certainly was critical of Say's Law.

Ricardo in chapter XXI of his Principles famously says:
"M. Say has, however, most satisfactorily shewn, that there is no amount of capital which may not be employed in a country, because demand is only limited by production. No man produces, but with a v…

Reacting to new data from the Bureau of Labor Statistics on union membership, EPI President Lawrence Mishel said:
New data for 2013 on the number and share of workers with union
coverage show some interesting trends. Private sector union coverage
increased but was offset by an erosion in the public sector, leaving
overall union coverage essentially unchanged (a decline of less than
0.1 percent, so rounding up becomes a 0.1 percent decline). The
increase in private sector collective bargaining coverage in 2013 is
noteworthy because it happened in 2007 and 2008 but otherwise hasn’t
happened since 1979. This was driven by increased union employment in
manufacturing and construction, where more than thirty-five percent of
net new jobs were covered by collective bargaining agreements. Union
coverage has increased in some states that may be unexpected. For
instance, private sector union coverage increased in each of the last two years in Virginia, North Carolina, Georgia, Kentu…

From The Real News NetworkEmerging markets have
been reeling since the beginning of the new year. The currencies and
stock markets of Argentina, South Africa, Turkey, among other countries,
have declined substantially, prompting their central banks to increase
interest rates to stem the outflow of capital. The emerging-market rout,
the worst start to a year on record, is widely believed to be related
to the winding down of the U.S. Federal Reserve's quantitative easing
program.Now joining us to discuss this is Jane D'Arista.
She's a research associate with the Political Economy Research
Institute, or PERI, at the University of Massachusetts, Amherst, where
she also cofounded an economist committee for financial reform called
SAFER, or Stable, Accountable, Fair and Efficient Financial Reform.
See here

Same graph David posted (from Mother Jones) with one addition, total government employment in the period just before and after the 1990-91 recession together with the 2007-8 one [also I don't show private employment].
The bump of the 1990 census is less visible than the 2010 one. But the obvious difference is the increase in the 1990s and the decrease now.

From Mother JonesJanuary's job numbers were fairly dismal, but the bad cheer wasn't equally spread. Private sector employment, as usual, increased—by 142,000 jobs last month. At the same time, public sector employment declined. Government employment at all levels was down 29,000 in January.Aside from the brief census blip in early 2010, this has been the usual state of affairs for the past four years, ever since the recession officially ended. The chart below shows public and private sector employment indexed to 100 at the end of the recession. Private sector employment is up 6.8 percent. Public sector employment is down 3.4 percent. And that's during a period when population grew 2.3 percent. On a per capita basis, government employment has declined more than 5 percent since 2009, and it's still declining.This is the price of austerity. If public sector employment had been growing normally during this period, we'd have about a million more jobs than we do now and…

‘Benjamin J. Cohen’s Advanced Introduction to International Political
Economy evaluates the fragmented intellectual landscape of international
political economy and suggests points of conversation, if not
integration, among its varied elements. His analysis is wide-ranging and
balanced, geographically and in its examination of a variety of
standpoints; it is engaging in its combination of sympathy and
criticism. All advanced students of the field will benefit from reading
it.’
– Robert O. Keohane, Princeton University, US
See here

The Lex column in the FT today also argues that the crisis is going to get much worse in developing countries. Their argument is based on the current account deficits. I've discussed that yesterday here. Note that the figure used to illustrate the point shows the current account as a share of GDP (as a share of exports is always better, since it gives a sense of the amount of the country's source of hard currency), and also the stock market, which seems to be doing better in countries with surpluses.
The figure actually shows that the only two countries with relatively large current account deficits are Turkey and South Africa. Brazil and India, for example, have deficits that are not that large. Argentina, not shown in the picture, and with more problems than most in it, has a practically balanced current account. Of course the FT, like Roubini, suggests that contractionary policies are what the Dr. recommends. Oh well.

Great line today, even if unintentionally funny, in David Pilling's column (subscription required) in the Financial Times. He notes that many are comparing Raghuram Rajan, the new head of the Reserve Bank of India (RBI), with Paul Volcker, inflation hawk, and one time chairperson of the Fed. Rajan has denied the similarities, but as noted by Pilling: "if Mr. Rajan does not want to be seen as Paul Volcker, he has done a pretty good impersonation so far." Not sure that's what India needs with the economy decelerating, but I'll not delve into that right now.

By Monique Morrissey
The aftermath of the Great Recession has led to outright wage
declines for the vast majority of American workers in recent years,
resulting in a full decade of essentially stagnant wages.
Though you might expect public-sector wages to have weathered the
recession and its aftermath better than private-sector wages, the
opposite appears true: While the decline in real public-sector wages
started later, it was steeper and ultimately more damaging. According to
the Bureau of Labor Statistics’ Employment Cost Index, public-sector
wages have fallen by about 1.3 percent in inflation-adjusted terms since
2007, where private-sector wages have been essentially flat (an
increase of 0.3 percent). Unlike in previous recoveries, state and local government austerity
has been a major drag on job growth and the broader economy. The number of public-sector jobs
fell by almost 3 percent in the three years following the recession,
while the number of private-sector jobs…

The series of devaluations in the currencies of a few developing countries (I prefer the term to the one in the title, which became popular in the 1990s, when Neoliberal policies required selling bonds in international financial markets, and, hence, emerging markets sounded more marketable than underdeveloped country) has led to a lot of speculation about the collapse of the boom in the periphery. The graph below shows that depreciation has been between moderate to severe, depending on the country (source by The Economist).

The Argentine peso and the Turkish Lira lead the pack, by far. Nouriel Roubini, the so-called Dr. Doom, has suggested that the problems have a common cause, based political problems, and loose fiscal policy leading to external deficits. According to Roubini (here):
"Many
emerging markets are in real trouble. The list includes India,
Indonesia, Brazil, Turkey, and South Africa – dubbed the “Fragile Five,”
because all have twin fiscal and current-account def…

By Paul Krugman
Social expenditure comprises cash benefits, direct in kind provision of goods and services, and tax breaks with social purposes. Benefits may be targeted at low Income households, the elderly, disabled, sick, unemployed, or young persons. To be considered “social”, programmes have to involve either redistribution of resources across households or compulsory participation.
See rest here.

By Dean Baker
The retrospectives of Ben Bernanke on his leaving the Fed seem to be
coming in overly positive. While there is much that is positive about
his tenure as Fed chair, many of these accounts have a rather selective
view of history.
The part that is clearly wrong is treating Bernanke as a bookish
academic who got plucked down in the middle of a financial crisis that
was not his making. While Bernanke had a distinguished academic career,
he had been in the middle of the action in Washington since 2002. That
was when he was selected to be a governor of the Fed. He served as a
governor at Greenspan’s side until he went to serve as head of President
Bush’s Council of Economic Advisers in June of 2005. After a brief
stint as the chief economist in the Bush administration he returned to
take over as chair of the Fed in January of 2006.
It was during the period that Bernanke was at the Fed and his tenure
in the Bush administration that the housing bubble grew to such …

Tae-Hee Jo, Fred Lee, Nina Shapiro, and Zdravka Todorova have compiled a list of readings in Heterodox Microeconomics that deserves attention and praise (available here). The only classic book that was central in my formation that I see missing is Paolo Sylos-Labini's Oligopoly and Technical Progress (1962). My favorite graduate textbook still is the one by Fabio Petri here.